Bankruptcy and Retirement Assets

Can Your Retirement Assets Be Available to Creditors in a Bankruptcy Proceeding?

It’s no secret that medical expenses are one of the primary causes of personal bankruptcy filings in the United States. Unfortunately, as you age, your risk of health problems and substantial medical bills increases significantly. You may be edging in on retirement, incurring substantial financial debt, but afraid to seek protection under the bankruptcy laws for fear that you’ll lose your retirement. There’s good news!

Under federal law, most pension and retirement assets cannot be used to satisfy creditors in a bankruptcy proceeding. If you file for protection under Chapter 7, you won’t have to liquidate your pension. If you file for Chapter 13 reorganization, your pension assets won’t count when the court determines how much you can pay your creditors.

As a general rule, all types of retirement and pension funds are protected, including IRAs, 401(k)s, 403(b)s, profit sharing, defined benefit, money purchase and Keogh plans. There’s only one exception—you can only protect up to $1,245,475 in all your IRA investments.

Distributions from a Qualified Retirement Plan

The exemption on access to retirement assets applies only to funds in a retirement account. The bankruptcy court and the trustee will never be allowed to make you pull assets out of a retirement plan to pay a creditor. However, if you start pulling funds out of a retirement plan, that will be considered income and can be accessible by your creditors.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

At the Law Office of Carrie L. Weir, I provide a free initial consultation to anyone with questions or concerns regarding a personal bankruptcy filing. Contact my office by e-mail or call me at 972-772-3083 to schedule a private consultation. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.